The firm plans on Thursday to roll out PAAMCO Select, a stock portfolio whose assets are allocated to a number of hedge fund managers who will make bets on stocks for investors who are seeking more than what the average index fund can provide.

The fund, housed within a unit of PAAMCO Prisma Holdings LLC, which has more than $30 billion in assets under management and advisement, is being launched at a critical time for both hedge funds and pension funds.

Hedge funds, known for their hefty fees and a string of poor performance in recent years, are having a tough time raising money. Meanwhile, pension funds are under pressure to beef up returns and have been looking for unique strategies that can outperform market indexes.

"This business is going to marry the clients' needs for higher returns and the hedge fund managers' skills in picking great stocks," said Carrie McCabe, a managing director at PAAMCO who came up with the idea and will be the portfolio's chief investment officer.

She has seen managers develop into outstanding stock pickers over her career, but McCabe said many have suffered from short positions added to stand out from mutual funds, which generally do not short - or bet stock prices will fall.

McCabe declined to identify which hedge funds will be part of PAAMCO's new offering, but described them as being run by a dozen long-established managers who oversee billions in assets and specialize in selecting large-cap stocks.

"The best hedge fund managers are the best stock pickers in the world," she said. Star managers like Andreas Halvorsen and Stephen Mandel have offered clients so-called long-only portfolios.

McCabe would not detail pricing, except to say the portfolio will cost less than a management fee of 2 percent and 20 percent of profits that hedge fund managers typically charge.

Last year's performance was the best since 2013 for the $3 trillion hedge fund industry, with the average fund gaining 8.5 percent, Hedge Fund Research data show. But many funds still trailed their benchmarks, with the S&P 500 index gaining 22 percent. (Reporting by Svea Herbst-Bayliss, editing by G Crosse)